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Seth was already fairly 'famous' when he got the role of Oz, so he was constantly filming other movies and shows while filming Buffy, which required him to change his hair color to fit with whatever character he was playing week-to-week.
Actually, everyone tries to overthink this question. Oz has never had any desire to color his hair any different than it naturally is. He just keeps confusing hair CONDITIONER with hair DYE. Being the genius that he is, he never bothers with the trivia in life, so he just thinks that the different coloring is an after effect of his "conditioner," and only buys whatever is on sale, regardlessof the label.
There's probably a practical reason o do with playing other roles but, in show, I kinda like the idea a change in his appearance is forced on him once a month but he still has autonomy and can change it himself once a week. There's a traditional connection between women and werewolves (Luna is a female goddess; women have a four-week menstruation cycle; werewolves change during a full moon) - hence the Ginger Snaps films, Company of Wolves and (I think) Red Riding Hood. In BtVS much is made of women changing their hair but Giles, Xander, Spike and Angel have the the same hairstyle throughout. In fact, Spike connects Angel's use of hair product to "aberrant" masculinity or homosexuality - he "feminizes" him. Oz isn't a "traditional" male and it suggests that, despite this, he's comfortable in his own skin (pun intended).